by Kim Souza (ksouza@talkbusiness.net) January 6, 2020 5:09 pm | TalkBusiness.Net
Gift cards remain one of the most popular holiday purchases and yet Americans left $1 billion unspent on gift cards last year, according to the National Retail Federation. A public awareness campaign has been launched to remind consumers to use their gift cards before they forget.
Jan. 18 has been dubbed National Use Your Gift Card Day and retailers from Kohl’s to Saks Fifth Avenue are giving extra perks to consumers who cash in gift cards on that day. Thus far, 16 retailers have signed on to the program offering discounts and other bonuses in connection with spending on Jan. 18.
Restaurants and entertainment businesses are also joining the fray. Applebees, Chipotle, Red Lobster, Panera, Fandango and AMC are among those participating in this shopping campaign.
“Although gift cards are a favorite gift, the fact that so many go unused sparked the concept,” said Tracy Tilson, founder of UseYourGiftCard.com. “National Use Your Gift Card Day was developed not just as a one-day reminder to use gift cards, but as a year-round online platform with expert tips on how to maximize them.”
Tilson said the idea for the National Use Your Gift Card platform began with an “ah-ha” moment.
“I was going through an old wallet and found several gift cards that I had received over the last few holidays and simply forgotten. On top of that, I discovered gift cards that my sons had been given and ended up buried in desk drawers … all adding up to lots and lots of unspent dollars! I realized that if I’d forgotten mine, certainly many other people were forgetting to use their gift cards, too,” Tilson said.
This prompted her to create National Use Your Gift Card Day and build the digital platform as a way to remind consumers to spend the cards. Tilson said the digital platform is dedicated to helping consumers maximize their gift cards with special deals and offers from restaurants and retailers all in one place.
The National Retail Federation reports gift cards consistently rank as the second-most given gift in recent years. In 2019, Americans purchased an estimated $171 billion worth of these plastic cash substitutes, ranging from $500 prepaid Visa cards to $25 Starbucks cards for coffee lovers. Marketwatch reports gift cards comprise about 55% of the average shopper’s entire annual gift budget.
Paytronix reports 73% of gift cards are redeemed within the first six months, but the redemption percentages fall dramatically after that with just 78% of cards redeemed within one year of receipt. Federal law dictates most gift cards can’t expire for 5 years. For retailers, the unused cards show up as liabilities on their balance sheets, until they are used.
In 2019, Walmart reported $1.9 billion in unused gift card liabilities. This compared to $2.8 billion reported by Amazon in 2018. Also in 2018, Starbucks reported $1.6 billion in used card liabilities, while Target reported $727 million that same year. Federal accounting changes in 2018 allow retailers to charge breakage fees on used cards after a 24-month period. This gives retailers an opportunity to off-set the outstanding liabilities from unused cards.
Retailers said they would prefer to see consumers spend their cards upon receipt because they often spend more than the gifted amount and it eliminated the need for carrying liabilities.
Tilson encourages consumers to check the UseYourGiftCard website to see which retailers are participating in the Jan. 18 campaign and then make a plan to use them. For consumers holding cards they aren’t likely to use, there is always regifting to friends or non-profits, she said.